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The major concern remains the low interest rate environment. We do not believe rates will increase as fast as in other cycles. The valuation on fixed income in general is rich, and equities are also valued on the high side, depending on the region. It is really difficult to hide right now. I am not that optimistic for the mid-term future, and therefore our internal expected returns are quite low for the next three years.

Overall, I see geopolitical tensions having an increasing impact on markets. Also within the euro-zone, there are lots of unsolved problems. We have to discuss what are the potential end situations for the euro-zone. A fully consolidated monetary and fiscal union is a difficult option, given the rise of right-wing populist parties that we are seeing. From a political point of view, breaking up the union is the easier way out, but it has great costs. The halfway solution is accepting the stagnation and trying to muddle through. However, the active central bank policy does not change the fundamentals; it just buys you time.

Individual countries must do their own homework in terms of structural reforms. There are some glimmers of hope such as Spain, but a lot of less promising examples, such as France and Italy. Only if countries are successful in improving their competitiveness, and they do it in a timely way, is there hope for Europe.

The situation in the US looks far better than everywhere else. However, it is difficult to establish whether they are strong enough to drag the whole world with them. Obviously the path of the economies of China and Europe will determine the outcome as well. If China manages to have a soft landing, achieves 7% real GDP growth, becomes less reliant on outside investment and develops a middle class, and if the EU manages to muddle through successfully, I could see the US leading everybody else from a fundamental point of view.

In my opinion, the active central bank policy places a hidden tax on pension funds and savers around the world. With zero or negative short-term interest rates and quantitative easing, central banks impact the equilibrium of the market, causing both the short-term and long-term rates to be too low. On the other hand, I can see how the low-interest-rate environment clearly brings some macroeconomic benefits, as it makes it easier for firms to access debt-financing opportunities. But it’s not a free lunch; it comes at a cost that is borne by savers and pension funds.